Utility-Scale Private Electricity Deal A First For South Africa

Utility-Scale Private Electricity Deal A First For South Africa

Cape Town and Johannesburg, South Africa – 24 May 2017

In one of the first of its kind transactions in South Africa, the electricity produced by a privately owned hydropower plant is being sold to POWERX, a NERSA licensed national aggregator of power.
Bethlehem Hydro, an independent power producer (IPP) and subsidiary of Renewable Energy Holdings (REH), has entered into a contract under which the full output from its 4MW Merino hydro power plant will be sold to POWERX, an electricity trader. POWERX delivers the power to a portfolio of customers throughout South Africa. The Merino power plant is located near Clarens, in the Free State Province, and has been in operation since 2010.

According to Anton-Louis Olivier, CEO of REH and Bethlehem Hydro, the transaction made commercial sense in the context of the current uncertainty in the power market in South Africa:
“The Merino power plant generates more than 25GWh of electricity per annum. This is enough to power some 4 000 households. Initially, the Merino plant sold its output to Eskom under a short-term supply programme. However, early in 2017 Eskom decided to stop purchasing power under this programme. Not only was POWERX able to offer us an attractive tariff, but also a long-term contract with the necessary guarantees that such a transaction requires.”

For POWERX, working with credible and experienced IPPs such as REH, is of paramount importance to its success. Securing the Merino power plant’s stable and predictable supply enabled it to meet the demand from private customers for electricity from a renewable energy source.

“POWERX believes that, thanks to the stellar efforts of the Department of Energy and the Renewable Energy Independent Power Producer Program Office, the electricity market has matured to such an extent that the private sector can now carry the flag and relieve government of the heavy burden of providing National Treasury guarantees to renewable energy projects whilst still achieving the benefits of local economic development and direct investment which the country so desperately needs,” says Thembani Bukula, CEO of POWERX.

Olivier further adds: “The single factor that most determines the viability of a commercial and independent power plant is the power purchase agreement (PPA). To date, PPAs on a utility scale have only been possible if the IPP contracts with Eskom. Eskom is however, constrained in its ability to enter in to such PPA’s outside its strict procurement regulations, and this has limited the growth of IPPs in the South African market. The power trading market that PowerX is creating will go a long way to easing this constraint and enabling more IPPs to come online. We therefore have high hopes of the expansion of this willing buyer/willing seller market, not just in South Africa, but also in the rest of the interconnected Southern African Power Pool.”

Pictures:

The 4MW Merino power plant located near Clarens in the Free State Province